The aluminium industry could have made a potential saving of almost Rs 250 crore from an average 25,000-tonne recycling unit if import duties on scrap were lowered. This is the figure worked out on the basis of a cost-benefit analysis in terms of a saving on capital requirement, energy and forex by the aluminium industry.If one takes the rupee's depreciation into account, savings on import costs could be even higher. The aluminium industry has been asking the finance ministry to reverse its stand on the 20 per cent import duty imposed on scrap aluminium in the last budget. Comparatively, the duty on scrap steel is five per cent.The enhanced duty structure makes it difficult for downstream aluminium units to source recycled aluminium and save costs on power for the production of primary metal.
As per the cost-benefit analysis, the maximum amount saved from a recycling unit would be on the cost of energy which amounts to over Rs 161 crore taking into account a 95 per cent saving on power costs. Aluminiumscrap recycling requires just five per cent of the energy required for primary smelting purposes. A substantial Rs 75 crore is saved compared to the Rs 625 crore which would be required for capital expenditure for creating an equivalent capacity through smelting and captive power, taking the cost of capital at 12 per cent per annum. Moreover, import of 25,000 tonnes of virgin metal at the rate of $1,600 per tonne would involve an additional cost of $3.2 million, whereas imports of scrap would cost much less at $1,472 per tonne.
The industry's contention is that modern scrap recycling, which is environmentally benign and can actually upgrade the scrap, requires approximately an investment of $500 per tonne of installed capacity compared to $5,000 per tonne for primary metal. The scale of a modern aluminium scrap recycling plant is about 25,000 tonnes per annum and upwards, whereas the minimum scale for modern aluminium smelters is 2,40,000 tonnes per annum. A much larger investment is thus needed.
The needto import scrap stems from the fact that domestic scrap is not segregated and suitable for recycling. Moreover, the current size of the sheet and extrusion market in India, which uses primary metal, is about 150,000 tonnes and 85,000 tonnes per annum respectively. Estimates show that nearly 25,000 tonnes of sheet applications and 40,000 tonnes of extrusion applications today can be better served with recycled aluminium without any effect on the quality.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
